Executive Briefings

CEOs in Every Industry Scrutinizing R&D Expenses Just as They Do with Procurement

Until lately, research and development expenditures at big companies were one of the few areas where CEOs didn't get too particular about return on investment. They treated bench scientists like quarks who behave differently if merely observed. They wanted to avoid killing the goose laying the golden eggs by overly measuring either the eggs, or the goose. Corporate leaders were wary of crimping innovation with inadequate insulation of R&D outlays. And who could understand what all of those scientists and engineers were up to anyway?

But that is changing in the aftermath of the Great Recession due to the spread of "open innovation" models across big business and with the intensification of global competition in technology-oriented industries ranging from semiconductors to pharmaceuticals. CEOs, CFOs and CTOs now are pressing hard to create the same kinds of windows and levers on R&D disbursements and returns as they long have enjoyed on, say, advertising budgets and audience measurements, or paper-clip procurement and back-office productivity.

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Until lately, research and development expenditures at big companies were one of the few areas where CEOs didn't get too particular about return on investment. They treated bench scientists like quarks who behave differently if merely observed. They wanted to avoid killing the goose laying the golden eggs by overly measuring either the eggs, or the goose. Corporate leaders were wary of crimping innovation with inadequate insulation of R&D outlays. And who could understand what all of those scientists and engineers were up to anyway?

But that is changing in the aftermath of the Great Recession due to the spread of "open innovation" models across big business and with the intensification of global competition in technology-oriented industries ranging from semiconductors to pharmaceuticals. CEOs, CFOs and CTOs now are pressing hard to create the same kinds of windows and levers on R&D disbursements and returns as they long have enjoyed on, say, advertising budgets and audience measurements, or paper-clip procurement and back-office productivity.

Read Full Article